Question

A SWOT analysis is one of those useful tools. Another important tool used to scan the business environment is PEST. discuss at least one advantage and one disadvantage of using SWOT and PEST analysis.

Answer 1

SWOT ANALYSIS

For the generation of a series of strategic alternatives or choices, it is necessary to analyse the firm's internal strengths and weaknesses and its external opportunities and threats

The identification and analysis of strengths, weaknesses opportunities, and threats is normally referred to as SWOT analysis.

1) Strength

Strength is an inherent capability of the organization which it can use to gain strategic advantage over its competitors

2)Weakness:

A weakness is an inherent limitation or constraint of the organizationw hich creates strategic disadvantaged to it.

3) opportunity

An opportunity is a favourable condition in the organisation environment which enables it to strengthen its position.

4) Threat:

A threat is an unfavourable condition in the organisation's environment which causes a risk for, or damage to the organisation's position

The major purpose of SWOT analysis is to enable the management to create a firm specific business model that will best align, fit or match an organisational resources and capabilities to the demands of the environment in which it operates.

Strategic managers compare and contrast the various alternative possible strategies against each.

Advantage of SWOT

a) Multi-Level Analysis

You can gain valuable information about your objective's chances by viewing each of the four elements of the SWOT analysis – strengths, weaknesses, opportunities and threats – independently or in combination. For example, identified threats in the business environment, such as new government regulations regarding a product design or the introduction of competing products, might alert the business owner that a proposed investment in a new manufacturing production line should be more carefully evaluated.

It provides aLogical Framework: environmental opportunities and threats lead to the approaches to specific strategies and finally the choice of strategy that takes place through an interactive process in dynamic backdrop.

b) It provides a logical framework

Variation in managerial perceptions about organizational strengths and weaknesses and the

C) It presents a Comparative Account:

SWOT analysis presents the information about both external and internal environment in a structure form where it is possible to compare external opportunities and threats with internal strengths and weakness.

PEST Analysis

PEST is a strategic planning tool used to evaluate the impact political, economic, social, and technological factors might have on a project. It involves an organisation considering the external environment before starting a project.

Advantages of PEST

• Straightforward and only costs time to do.
• Provides an understanding of the wider business environment.
• Encourages the development of strategic thinking.
• May raise awareness of threats to a project.
• Can help an organisation to anticipate future difficulties and take action to avoid or minimise their effect.
• Can help an organisation to identify and exploit opportunities.